2023 (11) TMI 1183 - AT - Income Tax

Unexplained deposit made in the bank account - assessee filed the return of income declaring total income from the business of trading in Cattle Feed (Cotten Seed Cake) - HELD THAT - Deposit as well as withdrawal mostly by issuing cheques in banks favour showing the narration y/s (yourself) clearly manifest the transactions of issuing drafts as explained by the assessee for purchase of the goods. AO has added the entire deposit in the bank account to the income of the assessee without even considering facts available on record in the shape of the bank account statement of the assessee having both entries of deposit as well as the payments through bank drafts. Therefore, the addition made by the AO ignoring the relevant facts available on record is not justified when the assessee have already explained the source of deposit as sale proceeds and corresponding withdrawals represent the payments made for the purchases through bank drafts corroborating explanation of the assessee. Accordingly having considered the undisputed facts as reflected from the bank account statement of the assessee the addition made by the AO of the entire deposit made in the bank account is not justified and the same is deleted. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are condonation of delay in filing the appeal and the addition of bank deposit in the assessment order.

Condonation of Delay:
The appeal was filed with a delay of about one year due to the appellant's health issues and lack of awareness about the impugned order. The appellant, belonging to a rural area, was not served with the order and only became aware when the bank account was attached. The delay was explained as unintentional and the appellant's CA advised filing the appeal before the Tribunal. The authorized representative's email ID was used for communication, and the delay was condoned considering the circumstances.

Addition of Bank Deposit:
The appellant did not file a return of income initially, and the AO issued a notice under section 148 to assess the income based on a bank deposit. The appellant explained that the deposit was from the sale proceeds of trading in Cattle Feed and payments were made through bank drafts. The AO accepted the return income, but a revision was made by the Pr. CIT directing further examination. The AO assessed the entire deposit to tax, leading to an appeal. The appellant argued that the addition was unjustified as the bank account statements supported the explanation of the source of deposit. The AO and Ld. CIT(A) justified the assessment based on failure to explain the source. The Tribunal found that the bank account statements clearly reflected transactions through bank drafts, supporting the appellant's explanation. Consequently, the addition made by the AO was deemed unjustified and deleted. The challenge to the validity of reopening was not addressed due to the decision on the merit issue.

In conclusion, the appeal was allowed in favor of the appellant, and the addition of the bank deposit was deleted based on the supporting evidence from the bank account statements.